Great blog posts about macroeconomics

The Top Ten Richest : A Story of Technology and Long-Run Growth

According to 2016 Forbes, the top ten richest people in the United States are as follows – Bill Gates, Jeff Bezos, Warren Buffet, Mark Zuckerberg, Larry Ellison, Michael Bloomberg, Charles Koch, David Koch, Larry Page and Sergey Brin. With over 300 million people living in the US, these ten people make up ~0.0000031% of the population. Together, the ten richest people in the US have a total net worth of 523.3 billion dollars. Together, they make up 3.33% of the 16.7 trillion GDP. The average net worth of the top ten is 52.3 billion. The median household net worth in the US ~75,000. Although this a scary realty, it is a fair one.

According to the Solow Growth Model, workers earn the equivalent of their marginal product of labor (MPL). Thus, it is not surprising that the richest people have made ground-breaking and lasting contributions to the US and the larger economy. These contributions include Facebook, Amazon, and Microsoft. Notice that most of these contributions are related to technology. Technology, A in the Solow Model, is a key factor to long-run growth for output. Technology, as we have seen with Microsoft, is constantly improved upon through previous innovations. The 2017 Microsoft Office is much more advanced than the first one released in 1992. By increasing A, these 10 people are significant producers of long-run growth.

Technology is a newer source of wealth. The richest men in American History, John Rockefeller (1900’s) claimed his wealth through the oil industry and Andrew Carnegie (1800’s) through the steel industry. Both of these contributions largely affect natural resources, N, to boost output. Now, technology is overwhelmingly the current and future “field” – not just for the top ten, but for all individuals.

A drawback of such great wealth in few hands is the power of saving verses consumption. A very wealthy person saves more than the average person. As we know, great savings may lower the money supply and impede short-run output. In the same breath however, great savings increases long-run growth, as seen in the steady-state solow model. By increasing technology and saving, the top ten are promoters of long-run growth. (The saving verses consumption issue should be considered when discussing tax policies.)

A few interesting side notes: All of the top ten richest people are men. Also, it is likely that a percentage of their incomes are sourced from foreigners. Websites and software can be spread easily from country to country.

4 thoughts on “The Top Ten Richest : A Story of Technology and Long-Run Growth”

This post gives an interesting perspective on wealth inequality which is rarely ever mentioned or discussed in this political climate. People only tend to react to the percentage of wealth held by the top percentages of our income groups and (usually) angrily spin off on that fact. I.E political candidates across the political spectrum. What a lot of people seem to pass up on is the capital and industry that is set up by these individuals and that current output growth significantly rely on these industry moguls to spur new innovative technologies, increasing A in the TFP model, or open up new industries, i.e IBM creating the PDA which set the pathway for the smartphone industry.

Of course, the question is whether Gates (and Rockefeller before him) is rich because of what he produced or whether he is rich because of his monopolization of a important industry, potentially reducing American productivity and prosperity.

That being said, I love my Apple devices, so I have no problem with Steve Jobs having accumulated a huge fortune.

This post interestingly brings up the discussion between equity and efficiency. While it is certainly efficient for these individuals to have accumulated such wealth, it’s questionable whether it is morally equitable. It’s also interesting to consider whether redistributing some of that wealth to lower classes would improve the economy through an increase in consumption. As is stated in the post, poorer people would be more likely to spend additional income, which would benefit the economy more than putting that money in a savings account.
-Kevin Lynch

I found this post shocking. I knew before reading that the ten richest people in the country combined likely had more money than I could even imagine, but to realize such a small amount of the population account for over 3% of GDP is still startling. Also, I have also realized that it tends to be that lots of the richest people in the country make their money off of technology but I have never really thought why. Your explanation to how technology can help boost output as an explanation for this was very informative.